RENTERS and small businesses could be the losers of a new Victorian land tax aimed at paying off the state’s COVID-19 debt, industry experts say.<\/p>\n
Advocacy bodies and the private sector have raised concerns that annual taxes could flow down to increased rents for commercial tenants and lead to a diminished pool of residential rental properties due to increased pressure on small-scale investors.<\/p>\n
In Geelong, local businesses have historically experienced high commercial council rates, and since COVID, rental vacancy rates have dropped below 2 per cent and media prices jumped above $500 a week.<\/p>\n
Last month’s 2023\/24 Victorian Budget lowered its tax-exemption bar to capture more properties and added new fixed charges, plus a further levy based on land value for properties that were previously taxed.<\/p>\n
The state government expects to rake in $4.7 billion over four years as part of the COVID Debt Levy, which will recoup $8.6 billion to state coffers in that period.<\/p>\n
The new rules take effect from January 1, 2024 and will last until 2033.<\/p>\n
The tax-free threshold will drop from $300,000 to $50,000. Family homes remain exempt.<\/p>\n
Taxpayers will also have additional charges from next year determined by the value of their landholdings; $500 for land valued between $50,000 to $100,000 and $975 for land above $100,000.<\/p>\n
Land worth $300,000 for general taxpayers, or $250,000 for trusts, will have tax rates increased by 0.1 per cent of their land value on top of the levy.<\/p>\n
Based on Armstrong Creek’s median residential land value of $420,000, an investor would pay an extra $1,095 of annual land tax from next year \u2013 on top of this year’s estimate of $615 from the State Revenue Office.<\/p>\n
Treasurer Tim Pallas said in his budget speech last month that the “modest” charge would target groups that “did better out of the pandemic”.<\/p>\n
“Business profits are up 24 per cent over the past three years compared with the previous three. Land values have increased 84 per cent in the past 10 years,” he said.<\/p>\n
“We’ve structured the repayment plan in a way that’s reasonable and proportionate to those with an ability to pay.”<\/p>\n
Budget documents say the debt levy would “apply to big businesses [and] investors” and its structure would be “reasonable and proportionate to ability to pay”.<\/p>\n
Greg Sugars, chief executive officer of Geelong valuation firm Preston Rowe Paterson, said the policy risked affecting commercial tenants more than investors.<\/p>\n
Mr Sugars claimed that the new tax could be interpreted as an outgoing for landlords, potentially leading to them passing on the cost in the form of rent increases.<\/p>\n
“These tax reforms will not only impact owners but potentially tenants as market rentals could be affected in addition to capital values, depending on how outgoings are recovered in pre-existing leases.”<\/p>\n
Victorian executive director of the Property Council Cath Evans said the levy would heap more pain on the under-pressure rental market.<\/p>\n
“Most of the state’s rental stock is owned by mum and dad investors that lease their investment properties to Victorian renters.<\/p>\n
“The temporary land tax hikes risk having the side effect of reducing rental supply in the market, leading to upwards pressure on rents at a time when affordability is critical.”<\/p>\n","protected":false},"excerpt":{"rendered":"
RENTERS and small businesses could be the losers of a new Victorian land tax aimed at paying off the state’s COVID-19 debt, industry experts say. Advocacy bodies and the private sector have raised concerns that annual taxes could flow down to increased rents for commercial tenants and lead to a diminished pool of residential rental […]<\/p>\n